Oncogenex finds itself in biotech no-man’s land

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Oncogenex might well pique the interest of investors screening the biotech sector for undervalued companies, given that it is now trading at a significant discount to its cash levels.

However, closer inspection will reveal a business whose two main assets have failed in the clinic, the latest announced after market close yesterday. The problem is that Oncogenex’s cash is tied up in studies that have either already flunked primary readouts or are likely to do so, yet which for ethical reasons the company must continue running to conclusion.

As such Oncogenex is trapped in biotech no-man’s land. Were it not for the fact that it is unable to scrap the trials or otherwise change course, Oncogenex could conceivably make an attractive shell for a reverse merger.

Yesterday’s setback concerned the Spruce trial of apatorsen, an Hsp27 antisense project, which failed to show a benefit in its primary endpoint of progression-free survival in first-line non-squamous non-small cell lung cancer.

Oncogenex stock opened off 30% this morning, valuing the group at just $15m. The company has yet to report full-year financials, but at the end of September it had $66m in cash and short-term investments.

Spruce, an investigator-sponsored trial, was the third apatorsen study to fail, after Rainier in pancreatic cancer and Borealis-1 in bladder cancer. The company conducted further analyses of Borealis-1 and reckoned it could tease out a benefit in poor-performance patients; Borealis-2, also in bladder cancer, passed a futility analysis in December and is continuing, as is Spruce.

Financial drain

However, a greater drain on finances are the much larger ongoing studies of Oncogenex’s other failure, custirsen, a Clusterin antisense project.

This is in two trials, Affinity and Enspirit, in prostate and lung cancers respectively, which have both had their designs changed either to reduce the planned recruitment or focus purely on poor-prognosis patients. That came after the phase III custirsen trial, Synergy, failed in prostate cancer in April 2014, prompting Teva to pull the plug on a key licensing deal.

As such it might not come as a huge surprise that Oncogenex investors are not buying the company’s upbeat talk of looking forward to data from Enspirit and Affinity, which have both passed interim futility analyses, but they can do little but watch the group burn through its cash pile.

Oncogenex has not been helped by picking cancers like lung and prostate, which have seen huge treatment advances in recent years; these risk either making its projects irrelevant or scuppering study designs if placebo recipients are able to move on to more efficacious treatments.

The company has been trading below $1 for the best part of two weeks now, and after this morning’s fall the stock stood at around 50 cents. It seems that a Nasdaq delisting notice could be the next problem for the company to sort out.

Project Study Design Data Trial ID
Custirsen Synergy 1,023 1st-line metastatic castrate-resistant prostate cancer pts Failed NCT01188187
Custirsen Affinity 630 2nd-line metastatic castrate-resistant prostate cancer pts Readout Dec 2016, after protocol amendment NCT01578655
Custirsen Enspirit 700 2nd-line NSCLC pts Readout Jul 2017, after protocol amendment NCT01630733
Apatorsen Rainier 132 pancreatic cancer pts, on top of Abraxane Failed NCT01844817
Apatorsen Borealis-1 182 bladder cancer pts, on top of gemcitabine & cisplatin Failed NCT01454089
Apatorsen Borealis-2 200 bladder cancer pts, on top of docetaxel Passed futility analysis, readout 2016 NCT01780545
Apatorsen Spruce 155 1st-line NSCLC pts Failed, continuing to OS data in H2 2016 NCT01829113

To contact the writer of this story email Jacob Plieth in London at jacobp@epvantage.com or follow @JacobPlieth on Twitter

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